The payroll process uses calculation methods supported by Vertex data. Different calculation methods are available for each type of pay run and each type of jurisdiction.
The payroll process includes all earnings types during Regular pay runs, including supplemental earnings, and processes only supplemental earnings types in Supplemental runs.
Tax calculation methods involve the following considerations.
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What taxes does the process calculate
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What taxes are eligible for self-adjustment
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What calculation methods are availablefor:
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Federal income tax (FIT)
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Other federal taxes
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State income tax (SIT)
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State unemployment and disability insurance taxes
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How you configure taxes on theorganization calculation cards
Calculation by tax type
Tax calculations are applicable for these taxes.
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FIT
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Federal unemployment (FUTA)
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Medicare
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Social Security (SS)
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SIT
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State transit tax
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State unemployment insurance (SUI)
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State disability insurance (SDI)
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County income tax
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City income tax, including boroughsand townships
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School tax
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Family leave insurance
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Long term care insurance
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Head taxes, including local servicestaxes and occupational privilege taxes
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Mental health tax
Calculation self adjustment
You can perform self-adjustments on these tax types.
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FUTA
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Medicare
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SS
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SDI
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SUI
For additional info, see the Self-Adjustment Methodsfor Tax Withholding in the Help Center.
Calculation methods for FIT
These are the calculation methods available for FIT.
Calculation method | Run type | Calculate on period-to-date amount | What it does |
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Default | Regular | No | Takes the wages in a regular run, and calculates the tax, independent of how many regular runs are in a pay period. |
Default | Regular | Yes | Takes the wages in all the regular runs for the period, and calculates the tax. |
Aggregation | Supplemental | N/A | Takes the wages in all the regular and supplemental runs for the period, and calculates the tax. |
Cumulative Aggregation | Supplemental | N/A | |
Flat Percentage | Supplemental | N/A | This is the default method for supplemental payrollruns. The payroll process applies the appropriate flat percentageas set by the IRS. |
Calculation methods for other federal taxes
These are the calculation methods available for FUTA,Medicare, and SS taxes.
Calculation method | Run type | Self-adjustment method | What it does |
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Flat Rate | Regular and Supplemental | Bypass Collection | Earnings are exempt from tax. Note: Wage accumulation still occurs for these taxes. |
Flat Rate | Regular and Supplemental | No Self Adjust | Withholding calculations don't self-adjust retroactivelyfor any rate changes. The payroll process uses the new rate only fortaxable wages. |
Flat Rate | Regular and Supplemental | Self Adjust | Bases the withholding calculations on year-to-dateearnings, instead of earnings within a pay period. This provides themost accurate calculation. For retroactive rate changes, the payroll processself-adjusts the tax withholding or liabilities in the next availablepay run. |
Flat Rate | Regular and Supplemental | Self Adjust at Maximum | Similar to the Self Adjust method, except adjustsfor changes only after the maximum taxable wage base is reached. |
Calculation methods for SIT
These are the calculation methods availablefor SIT.
Calculation method | Run type | Resident wage accumulation | What it does |
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Default | Regular | None or default | Calculates the tax based on the amount paid in therun. |
Default | Regular | Credit Resident tax by Work tax, always accumulatewages |
It always accumulates wages for the residence, even if resident tax is $0. |
Default | Regular | Credit Resident tax by Work tax, accumulate wagesif taxed |
It accumulates wages only if it's withholding taxes. |
Default | Regular | No resident tax if work tax greater than zero, alwaysaccrue | Does not withhold residence tax if there is a worktax, but it always accumulates wages. |
Default | Regular | No resident tax if work tax greater than zero | Does not withhold residence tax if there is a worktax, and it only accumulates wages if there is a resident withholding. |
Default | Regular | No resident tax if work tax on nonresident, alwaysaccrue | Does not withhold residence taxes if there is a workstate tax. Wages accumulate for the residence. |
Default | Regular | No resident tax if work tax on nonresident, accrueif taxed | Does not withhold residence tax if there is a workstate tax. Wages only accumulate when there is a tax withheld. |
Default | Regular | No resident tax if work or residence location mismatch,accrue if taxed | Calculates work tax only and disregards residenttax. |
Default | Regular | Calculate tax independent of all other jurisdictions | Calculates resident tax independent of work tax. |
Aggregation | Supplemental | Refer to settings described in Regular runs | Takes the amount paid in a regular run and calculatesthe tax, independent of how many regular runs are in a pay period. |
Alternate Flat Rate | Supplemental | Refer to settings described in Regular runs | Applies to California only for required 10.23% taxation on certain supplemental wages. |
Annualized Previous Aggregations | Supplemental | Refer to settings described in Regular Runs | Combines the annualized Regular pay amount from theprevious pay period with the Supplemental pay. Tax is calculated onthis total amount. The state tax for Regular pay in the previous payperiod is subtracted from the total taxes for the year to determinethe tax for the current pay period. |
Default Method | Supplemental | Refer to the setting described in Regular runs | Takes the amount paid in a regular run and calculatesthe tax, independent of how many regular runs are in a pay period. |
Flat Rate | Supplemental | Refer to the settings described in the Regular runs | Multiplies the wages by a flat rate percentage. |
Flat Rate Combined | Supplemental | Refer to the settings described in the Regular runs | Multiplies the Supplemental pay amount for the currentpay period by a flat percentage. The tax on the Regular pay is calculatedusing the annualized method. The total tax is the sum of these twocalculations. |
Percentage of Federal Tax | Supplemental | Refer to the settings described in the Regular runs | Multiplies the federal supplemental tax amount bya flat percentage rate. This percentage is unique for each state thatuses this method. |
Tiered Flat Rate | Supplemental | Refer to the settings described in the Regular runs | Multiplies an employee's wages by a percentage rate.This percentage rate varies based on the amount of an employee's wages. |
Tiered Flat Rate, Multiple Tables | Supplemental | Refer to the settings described in the Regular runs |
Calculation methods for SUI and SDI
These are the calculation methods availablefor SUI and SDI.
Calculation method | Run type | Self-adjustment method | What it does |
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Flat Rate | Regular and Supplemental | Bypass collection | Earnings are exempt from wage accumulation and tax. |
Flat Rate | Regular and Supplemental | No self adjust | Withholding calculations don't self-adjust retroactivelyfor any rate changes. The payroll process uses the new rate only fortaxable wages. |
Flat Rate | Regular and Supplemental | Self adjust | Bases the withholding calculations on year-to-dateearnings, instead of earnings within a particular period. This providesthe most accurate calculation. For retroactive rate changes, the payroll processself-adjusts the tax withholding or liabilities in the next availablepay run. |
Flat Rate | Regular and Supplemental | Self adjust at maximum | Similar to the Self Adjust method, except adjustsfor changes but only after the maximum taxable wage base is reached. |
Flat Rate | Regular and Supplemental | Quarterly self adjust | Performs adjustments for rate changes on a quarterlybasis. Available for state taxes only. Use this method in cases where a state changes its rate midyear. By checking each quarter individually to determine adjustments, it maintains the integrity of the calculations before the change. |
Organizational tax calculations
For info on configuring taxes at the organizationlevel, see Configure Organization Calculation Cards for the US inthe Help Center.